As a third-generation life insurance producer, Jeffrey Taggart has seen industry trends come and go. One that stands out these days, however, is agencies of all sizes working to expand their business using financial planning that goes beyond the sale of traditional, commission-based insurance products.
Often referred to as "holistic financial planning" or "life planning," this approach helps agents build relationships with existing clients, says Taggart, president of the National Association of Insurance and Financial Advisors and owner of the Taggart Company.
"I see a lot of agents taking this approach," he says.
Whether they are called holistic financial planners or "trusted advisors," as Taggart prefers, their goal is the same: to learn as much about their clients' needs as possible and to be able to offer products and services that meet those needs.
Christopher Peck, owner of Holistic Solutions, provides a good working definition of holistic financial planning. According to Peck, the practice consists of comprehensive financial planning that addresses the emotional issues surrounding finances. It helps determine an overall picture of the client's needs, hence creating a more well-rounded approach to building their financial portfolio.
Getting started: Establishing partnerships
Expanding the breadth of services you offer your clients often requires partnerships with other professionals. Taggart says he typically builds relationships in which he is the "team leader," referring clients to others when necessary and coordinating the overall handling of the client. This approach helps all involved in the team.
"It's a two-way network. As you develop the relationships and become trusted advisors, it becomes a good relationship. Those have been very profitable," says Taggart. His partners include property and casualty agents, tax professionals, estate planners, and business planners.
Terry K. Headley, managing partner at Headley/Scott & Associates, also made the transition from a practice focused solely on traditional insurance sales to one that includes holistic financial planning. Headley approaches such planning from a "values-based, principle-centered philosophy. We look at our clients not just in terms of their financial goals, but what their hopes, dreams, and aspirations are, not only for themselves, but for the next generation or two.
"What we're finding is that many of them want to pass along their value systems and some of their philosophies, integrating them into their financial and life planning processes." This often plays itself out in the formation of family foundations, with heirs serving on the board, Headley said.
Working in this way requires Headley's agency to partner with a number of other professionals, including accountants, lawyers, trust officers, and bankers. Headley says he prefers to remain "the quarterback" in the arrangement, referring clients to the other players as needed. The partners will also occasionally send their clients to Headley to handle the insurance portion of a package they are assembling.
Defining your target market
While the holistic, broad-based approach can be used with any client, Headley
and other experts said they found it more likely to be well-received and
practical when meeting with more affluent clients.
"In the middle-income or lower-income market, it's probably not that feasible," Headley said. "In those cases, the more basic financial planning needs to take place."
Not everyone agrees. Charles Johnson, chief operating officer of DeWitt Stern, says clients with a great deal of wealth may prefer to deal with their insurance professional for insurance matters only and look elsewhere for overall financial planning. He suggested that clients with a net worth of "less than $500,000" may be the group most likely to seek broader financial planning advice from producers.
Either way, a key benefit of promoting a more comprehensive approach to your clients is that you have more opportunities during which to prove your value, says Gary C. Rygiel, president of the Professional Insurance Agents of New Jersey and executive vice president of Liberty Insurance Associates Inc.
"The more times I touch you, the more you trust me as an advisor, and the more product I can handle directly for you."
And while some see the potential market for these services in different ways, there is no dispute that people are beginning to place a higher value on finding help with their financial planning. According to the U.S. Department of Labor, Bureau of Labor Statistics Web site, "Overall employment of financial analysts and personal financial advisors is expected to increase by 37 percent during the 2006-16 decade, which is much faster than the average for all occupations.
"Growing numbers of advisors will be needed to assist the millions of workers expected to retire in the next 10 years. As more members of the large baby boom generation reach their peak years of retirement savings, personal investments are expected to increase, and more people will seek the help of experts."
While it may seem that the future is in expanding your business to include some form of holistic planning, there are some potential pitfalls to consider before making the leap. "Sometimes, in trying to expand your practice, you become almost inconsequential in everything ... there can be a big river and it can be 2 miles wide and a half-inch deep. There needs to be some depth in your practice," says Taggart.
There is also the question of being educated and competent enough to give solid advice or to develop the relationships needed to give that advice, says PIANJ's Rygiel. "The downside would be to not give the professional advice that's correct for the client. That's why it's important to have the alliances with people that you trust to give your clients to. If you referred someone to me and I didn't do a good job, it makes you look bad to your client."
Learning the ropes
For those considering an expansion of their services, there is a range of educational opportunities available, from short seminars to full curricula. The Kinder Institute of Life Planning, for example, teaches students how to become more client-centered, communicate better, and approach their clients' finances with a more holistic approach, says Eva Brodzik, director of business development. "What happens when that occurs is the client says 'Wow. This person is really interested in all aspects of our lives.' He becomes the trusted advisor, and people are more likely to go forward with the products he's suggesting. They are also more apt to bring more things to you, because you know what's in their heart's core." The Institute offers two and five-day courses that teach these and other concepts.
The American College also offers specialized courses to help professionals deal with clients at many points along the chronological progression, says Eric B. Gordon, director of public relations. "The needs of someone in their 20s, middle-aged, or older differ as their financial positions and lifestyles change.
We have a variety of programs that provide financial planning knowledge for individuals so that financial planners can address their clients' needs no matter what they are."
While there are associations dedicated to meeting the needs of financial planners, none focus specifically on the holistic approach. A white paper now being circulated among some practitioners, however, calls for the creation of the Association for Integrative Financial and Life Planning. This group would "promote the integration of financial and life planning," according to the paper.
Among its proposed goals are:
- Supporting the establishment of viable ways for individual practitioners to work together
- Pursuing publicity and education concerning holistic planning and advice concepts."
- Supporting ways that financial planning, taken by itself, can become more comprehensive and integrated -- especially, but not exclusively, for people in or near retirement.
While straight commissions typically come from typical product sales, agents can dramatically increase their referrals and cross-sales by utilizing holistic planning in their everyday practice. Partnerships with other professionals are essential, as is education in this field. There's no need to replace what you're doing, but adding another layer to your business can certainly improve the key aspect of an insurance business: client relationships.
Dan Kittay is a freelance writer. He can be reached at dan@kittaynewmedia.com.
